Country Report Greece October 2009

Outlook for 2010-11

• The prime minister, George Papandreou, wants to take steps to increase transparency and reduce corruption in the new government, but it remains to be seen whether he is willing to incur the political costs resulting from this.
• Mr Papandreou has enumerated a series of bills that the Panhellenic Socialist Movement (Pasok) aims to introduce within its first 100 days of government. These should be passed, given the party's majority of 160 out of 300 seats.
• The new administration aims to provide fiscal stimuli to support domestic demand and boost government revenue. However, the Economist Intelligence Unit expects the government to struggle to finance its spending programme.
• We expect the government deficit to soar to 13.1% of GDP in 2010, before narrowing marginally to 11.1% of GDP in 2011. Public debt will also increase, to 122.4% of GDP by 2011.
• Private consumption and investment will recover moderately in 2010-11 as the government implements stimulus measures, consumer and business confidence improve and bank lending criteria begin to loosen.
• There are risks to our economic forecast. The government may be forced to implement austerity measures and withdraw its fiscal stimuli. The current-account deficit will remain high in 2010-11 and is indicative of vulnerability.

Monthly review

• The opposition Pasok won a crushing victory over the centre-right New Democracy (ND) in the early general election on October 4th, winning 43.9% of the vote compared with ND's 33.4%.
• Under Greece's electoral law, Pasok won 160 seats in the 300-member parliament, giving it an absolute majority.
• ND's electoral platform focused on implementing austerity measures to rein in the public finances. Pasok's campaign was diametrically opposed to this, with calls to increase public spending by ???3.5bn to boost domestic demand.
• Mr Papandreou announced a new government on October 6th, consisting of only 14 ministries. Most notably, the Ministry of Economy and Finance was split into two and the post of deputy prime minister was resurrected.
• The general government deficit is set to soar in 2009, according to data for the first seven months of the year. According to the central bank governor, the deficit is likely to approach 10% of GDP in 2009.
• The volume of retail sales fell by 9.8% year on year in July, the ninth consecutive month of decline. However, the rate of decline decelerated moderately from 14.5% the previous month.

Source: Country Report

This report covers the following industry codes:
SIC Code: 60
NAICS Code: 52